"A moment's insight is sometimes worth a life's experience." - Oliver Wendell Holmes 1809-1894, American Author, Wit, Poet
It's slowly starting to make the headlines more often though it's still not appearing in the front pages. This means that the masses are starting to get the first whiff of this bull and this is when things start to get more volatile. It is also the stage that many contrarians start to get nervous and start thinking about bailing out. Nowadays we have two groups of contrarians. One being the true contrarians and the others are fashion contrarians. True contrarians believe that they should buy when no one is paying attention or hates the sector and jump out the moment the masses start investing heavily; fashion contrarians ignore all evidence around them and stick to the original argument that the sector they are investing in has to go up because the fundamentals have not changed at all. Gold bugs make for a classic example; in the last gold bull market they held all the way up and then continued to hold onto their investments all the way down.
Both methods of thinking are extremely flawed and that's why we focus on mass psychology. Mass psychology looks for extreme situations and thus even though the masses are starting to raise their heads and pay attention to uranium its nothing to worry about. We are going to sit and wait for the frenzy to build and when it finally gets to an unsustainable point we will bail out. Mass psychology is one of the most superior tools out there when it comes to understanding the markets, human nature and how our universe operates in general. It's so simple to understand that its simplicity is what makes it complex. One must be able to look at the world through the eyes of a child and then process this data through the mind of an intelligent objective and open minded adult. Most have lost the ability to view the world through the eyes of a child; with training it's possible to regain this once lost simple ability. One of the main things one has to do is stop paying attention to what appears to be the norm, do not be afraid to refuse or ignore requests from friends and family members urging you to do what's normal (you are far better of ignoring them if they won't leave you alone terminate the relationship), avoid what the masses are doing, stop paying serious attention to the news (in fact watch as little TV as possible) and use newspapers only as a source of entertainment. When you read the news do not let the editor tell you what to think, instead pay attention to the actual details and look for the story in the story that is being ignored or not told. Take what you need and dump the rest. News in its pure format is nothing but regurgitated gossip and as we all know gossip always contains a large degree of nonsense; it's up to you to weed out the gems from the junk.
Hence in our opinion uranium is still a very good long term investment; however it's going to be harder to make money now. The easy stage is over and we did very well here. We had several 100% plus winners from this sector. What do we mean by the easy stage? We simply mean that it's going to be a lot more volatile and the weak that have no patience and discipline will get eaten alive as they sell at the wrong time and buy at the wrong time.
There has never been a market before that has moved up non stop without even a small breather. On a monthly basis uranium has not even corrected 99 cents a pound. Uranium is up over a whopping 1000% from its low in 2002. It makes the Gold bull pale in comparison and that's why it amazes us why so many Gold bugs sit and simply think of the commodities markets as a Gold Market and forget all the other groups that make up this huge sector. In fact this year we feel that certain agricultural markets have the potential to perform much better then the precious metal sector in general. We are by no means negative on the precious metals sector, long term the outlook still remains incredibly bullish. You are watching history in the making so take notes and keep a diary for this is something that you can one day share with your kids or grand kids.
Charts courtesy of MineralSTOX.com
When one looks at a very long term Uranium chart one can truly see how strong this move up has been. Uranium has actually surpassed its old high and it has done so on an inflation adjusted basis which is truly a spectacular achievement. Thus it is one of the select few commodities markets that are in a truly bullish phase because not only has it blasted past its old high but it has taken this high on an inflation adjusted basis as indicated in the picture above.
We suspect that when uranium trades in the 110-132 ranges it will experience some sort of pull back; this pull back will be another opportunity to add to one's positions; right now there is a discrepancy taking place. Many of the smaller cap uranium stocks are trading way of their highs while the metal continues to put in new highs almost every week. Eventually these stocks will play catch up to the metal and when they do expect them to soar in value. We have taken positions in several such plays and are monitoring several more that we feel have the potential to eventually trade significantly higher; we would not be surprised if some gained in of these chaps went on to gain upwards of 300%. Recently URRE experienced such a move; it has gained over 500% from its low to its recent high in under 7 months. Uranium will need to trade above the 110 mark and stay there for over 18 days; if it can do this within the next 3 months it will set the base for it to test the 150 dollar mark. If it takes longer then 3 months to trade to this level it will need to trade above the 110 mark for 30 days in a row and then there is still the possibility that will break below the 110 mark one final time before rallying on.
The long term prospects for Uranium continue to look very bright especially in light of the fact that nation after nation continues to increase the number of power plants they intend to build in the future. Even England which ignored nuclear power for quite sometime has now embraced the idea that Nuclear power is the only viable solution to help them meet their long term power needs; as usual the U.S is the last but when it does fully embrace this concept expect them to play catch up in a hurry. All these new plants will need Uranium and currently mines are only able to meet 50% of demand; the rest comes from above the ground stock piles that are rapidly running out. Just imagine what is going to happen when all these plants that are being built (note to that new plans are drawn for nuclear plants almost on a monthly basis; thus the back log of plants to build continues to grow) come online; demand for this metal is going to spiral out of control.
"You've got to get to the stage in life where going for it is more important than winning or losing." - Arthur Ashe 1943-1993, African-American Tennis Player